The pandemic has transformed the online grocery channel from a middling category to one positioned for explosive growth. Online grocery sales are expected to increase 53% by the end of the year, according to research from eMarketer, totaling $89.2 billion. This is an increase of $30.9 billion compared to the previous year.
This trend is expected to continue. The report estimates growing online grocery sales over the next three years. By 2023, sales are expected to hit $179.2 billion annually, and will make up 10% of total grocery sales.
eMarketer isn't the only outlet predicting online grocery shopping growth beyond the pandemic. Aki Technologies and TapResearch conducted a survey of current online shoppers, and 68% responded that they expect to continue shopping online after the pandemic. The survey reported that the combination of increased shopping from existing buyers and the entry of new buyers created a perfect storm for growth. They called the growth "astronomical."
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But can grocery stores handle the growth? Certainly they have also gotten better at servicing these orders, by providing more delivery windows, express delivery and a bigger online selection of goods. Fresh Direct is a one example. Before the pandemic, the company served the New York City market, but following the pandemic, it expanded its services to Connecticut, New York's Westchester County and Long Island.
Robotic fulfillment facilities are also on the rise. Walmart and Albertsons, for example, have accelerated their efforts to automate their online grocery demand by using high-tech centers. Even Amazon.com has reportedly been looking at ways to automate grocery fulfillment and stay competitive in the high-volume grocery industry. According to the S&P Global Market Intelligence, using robotic equipment is 10 times faster than manually filling orders.
Once things return to normal, however this momentum could be lost unless they retool for the strategic challenges ahead, according to a report from Bain & Co. In fact, the sector could be facing several challenges in the year.
Without concerted strategic action, Bain modeling suggests grocery profits will only increase 1.2%—from just over $34 billion to $39 billion–between 2019 and 2030, in the absence of concerted strategic action.
The problems could start next year. If there is a vaccine, Bain thinks diners could rush back to restaurants and annual revenues could fall by 4% to 7%. If the pandemic lingers and restaurants struggle, US grocery revenues could rise 2% to 5% in 2021. In Bain's base-case scenario for 2021, restaurants begin to recover and grocery sector revenues stay flat or decline slightly. In comparison, grocers posted 2.6% annual sales growth between 2014 and 2019.
Bain thinks grocers could mount a "value-led counterattack" by doing things like stressing the cost of their ready-to-eat rotisserie chicken and roasted potatoes versus going out to eat or ordering in.
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Kelsi Maree Borland
